Monetary Policy Implementation Report for the Second Quarter of 2021: Expected Management of Monetary Policy Achieves Notable Results

Constructing a monetary policy expectation management mechanism is an important part of a sound modern monetary policy framework. Enhancing the operational rules and transparency of monetary policy, and establishing an institutionalized monetary policy communication mechanism will help effectively manage and guide public expectations, promote the consistency of market entities and policy objectives, and stabilize the macro economy. The “Fourteenth Five-Year Plan and the Outline of Long-Term Goals for 2035” proposes to improve the macro-policy formulation and implementation mechanism, and attach importance to expected management and guidance. In recent years, in the process of formulating and implementing monetary policies, the People’s Bank of China has continuously improved expectations management, formed a scientific and effective monetary policy expectations management and guidance mechanism, and improved the transparency and credibility of the central bank.

Improve the modern monetary policy framework and increase the transparency of monetary policy. Under the framework of modern monetary policy, it is clear that the intermediary goal of keeping money supply and the growth rate of social financing scale basically matched with the nominal economic growth rate has made the method of anchoring monetary policy goals clearer. Improve the policy interest rate system that uses the open market operating interest rate as the short-term policy interest rate and the medium-term lending convenience interest rate as the medium-term policy interest rate, and uses this as the operating objective, making it more intuitive for institutions and the public to observe the monetary policy orientation. Deepening the reform of the lending market rate (LPR) and improving the market-based interest rate formation and transmission mechanism from policy interest rates to LPR to loan interest rates have significantly improved the efficiency of policy transmission and the information transmission efficiency of the central bank.

Improve the normalized monetary policy communication mechanism to promote the formation of stable expectations in the market. The expected management frequency of monetary policy is gradually fixed, forming a practice of continuous open market operations every day and mid-term lending facilitation (MLF) operations at a fixed time in the middle of each month, and the relevant operational arrangements are released in advance to stabilize market expectations; the first month of each quarter Hold a press conference on financial statistics, release the “China Monetary Policy Implementation Report” in the middle of the quarter, hold a quarterly meeting of the Monetary Policy Committee and issue press announcements at the end of the quarter, cover all 12 months of the year, clarify the monetary policy stance on a monthly basis, and release Monetary policy signals; the People’s Bank of China will be held at the beginning and the middle of the year and press releases will be issued; the “Annual Report of the People’s Bank of China” and the “Report on China’s Regional Financial Operations” are released every year to objectively reflect the effect of monetary policy implementation.

Form a diversified monetary policy communication method to effectively improve the efficiency of communication with the public. The People’s Bank of China participates in the regular policy briefings of the State Council, the press conference of the State Council Information Office, publishes policy answers to reporters on the website of the People’s Bank of China and the transcript of the press conference (briefing), accepts interviews with domestic and foreign media, and publishes signed articles, etc. Respond to market concerns in a way; report the People’s Bank of China’s judgment on the economic and financial situation and the next step of work to the Financial Committee of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference, hold financial expert consultation meetings and professional association professional consultation meetings to introduce monetary policy work to experts and scholars and exchange ideas Opinions, establish a two-way interactive mechanism; effectively leverage the central bank’s new media matrix for government affairs such as WeChat official account and Weibo, and the Chinese and English website of the People’s Bank of China to form a diversified and three-dimensional expected management and guidance work system.

The effective implementation of monetary policy expectations management lies in the central bank’s “consistent words and deeds.” The central bank’s policy operations and external communication have confirmed the coordination of each other, which has enhanced the credibility of monetary policy. From the perspective of market liquidity expectations, the central bank guides financial institutions to pay attention to interest rates instead of paying too much attention to the amount of liquidity, and carries out daily open market operations to release short-term policy interest rate signals. Since the beginning of this year, liquidity and money market interest rates have run steadily, and there has been no major fluctuations at the end of the month or the end of the quarter. The deviation of DR007 from the open market 7-day reverse repurchase operation interest rate has been at a low level in the same period in recent years, which has created liquidity management for financial institutions. The stable environment also stabilized market expectations. Stable market expectations have further reduced the demand for preventive liquidity and enhanced the stability of liquidity.

In general, the expected management of monetary policy has achieved remarkable results. The monetary policy framework is more open and intuitive, the operation of monetary policy is more regular and transparent, the communication of monetary policy is more regular and institutionalized, and the communication efficiency between the central bank and the public has been greatly improved. The effectiveness of monetary policy transmission has been improved. In the next stage, the People’s Bank of China will adhere to the people-centered governance philosophy, focus on improving the transparency of the monetary policy framework, maintaining the efficiency and fairness of expected management, further enhancing the fairness of public access to information, and enhancing the effectiveness of monetary policy transmission and the credibility of the central bank.


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